The Green Sheet Online Edition

Can you tell me if there is an archive article of any sort related to the "argument against merchant aggregation." Anything along those lines would be fine.

Steve Rizzuto
President, Commercial Services
TransFirst LLC

Steve,

That's an excellent question, especially since the perception of what aggregation is has changed over the years from the forbidden practice of one merchant using his or her merchant identification number to process payments for multiple merchants, to that of payment businesses processing numerous small merchants under one umbrella.

Also, Visa is implementing changes to its Fixed Acquirer Network Fee (FANF) that are expected to raise costs for aggregators because Visa will be assessing FANFs based on individual merchant transaction types and volumes rather than as one fixed fee per aggregated merchant group. This topic is touched upon in a news article we posted April 24, 2014, under Breaking Industry News on our home page, www.greensheet.com. And Ken Musante, President of Eureka Payments LLC, is writing an article on Visa's FANF changes that will be slated for an upcoming issue.

As for archived articles that delve into the cons of aggregation, here are several that should be helpful:

"Is the aggregator model right for you?" by Chandan Mukherjee, The Green Sheet, July 9, 2012, issue 12:07:01: This discusses the pros and cons of several aspects of the aggregation model: risk assessment, transaction switching, funds settlement, and reporting and business intelligence.

"Micropayments are no small matter," by Patti Murphy, The Green Sheet, March 26, 2012, issue 12:03:12: This article doesn't argue against aggregation, but it mentions a way to process micropayments for digital content providers that doesn't necessitate aggregation.

"What is an aggregator anyway?" by Adam Atlas, The Green Sheet, Nov. 28, 2005, issue 05:11:02 While some of the content in this article is out of date because the card brands' structure and rules have changed, some of the drawbacks to aggregation remain applicable.

We published a lead article, "Switch it up this year: investigate aggregation," The Green Sheet, Jan. 13, 2014, that focused on the positive aspects of aggregation. A feature on the downside of this practice would likely be valuable to our readers.

Thanks again for your question. Let me know if I can be of further help.
Editor

Most of our sources distinguish between government-backed currencies like the U.S. dollar, and virtual currencies such as bitcoin. But virtual currencies are nevertheless real and on the government's radar. In August 2013, Judge Amos Maazant of the U.S. District Court, Eastern District of Texas, ruled that while bitcoin is not akin to the U.S. dollar, it is comparable to precious metals, such as gold, or other valued resources. The defendant in that case had argued that bitcoin is not money and is thus neither regulated by the United States nor subject to lawsuits based on laws pertaining to currencies.

In March 2014, the IRS ruled that bitcoin and other virtual currencies do not have legal tender status, but are instead a form of property governed by capital gains tax regulations. Also, wages paid in bitcoin are subject to income tax at the value of the bitcoin at the time of payment. Such payments are also subject to employer tax withholding requirements. The IRS views bitcoin payments for goods and services much like it views barter transactions.

Whether bitcoin is here to stay is difficult to predict. Given the lack of success of prior alternative currencies due in part to unfavorable monetary policy, at least in the United States, banking on bitcoin is not for those who are risk averse. Good luck to you if you decide to invest in bitcoin.
Editor

What's your perspective?

Do you have thoughts on the impact of merchant aggregation on our industry and whether it's a good idea to adopt it as a business model? What about other concerns of promising developments of interest to payment pros? Please let us know at greensheet@greensheet.com.

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